Hörner, Johannes and Sanktjohanser, Anna (2022) Too Much of A Good Thing? TSE Working Paper, n. 22-1327, Toulouse, France

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We consider a repeated game, in which due to private information and a lack of flexible transfers, cooperation cannot be sustained efficiently. In each round, the buyer either buys from the seller or takes an outside option. The fluctuating outside option may be public or private information. When the buyer visits, the seller chooses what quality to provide. We find that the buyer initially forgoes mutually beneficial trades before then visiting more often than he would like to, myopically. Under private information, the relationship recurrently undergoes gradual self-reinforcing downturns when trust is broken and instantaneous recoveries when loyalty is shown.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2022
Place of Publication: Toulouse, France
Uncontrolled Keywords: Trust, Loyalty, Imperfect Monitoring
JEL Classification: C72 - Noncooperative Games
C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
C78 - Bargaining Theory; Matching Theory
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 06 Apr 2022 10:40
Last Modified: 06 Apr 2022 10:41
OAI Identifier: oai:tse-fr.eu:126845
URI: https://publications.ut-capitole.fr/id/eprint/45138
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